BenefitsLink Retirement Plans Newsletter for May 11, 2001

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The BenefitsLink Newsletter -
Retirement Plans Edition

May 11, 2001

Today's sponsor: Employee Benefits Webcast (click)

   Determination of Required Minimum Retirement and Death
   Distributions from Qualified Plans, IRAs, 457(b) Plans
   and 403(b) Plans   Presented LIVE on Monday May 14th at 1 p.m. EST.   Instructor: Larry Grudzien of Buck Consultants

Do Retirement Jitters Have Silver Lining for Providers?
Excerpt: "Banks, mutual fund companies, and insurers say the recent decline in workers' confidence that they are saving enough for retirement could be good news for their 401(k) businesses, which have been enduring flat growth for the past two years." (American Banker)

The Settlement of the First Union Cases
Excerpt: "Two of the most publicized ERISA litigation cases in recent memory, the First Union cases, have settled. The settlement does not create new law, but the amount of the settlement---$26 million---signals the importance of the cases to 401(k) plan sponsors and possibly to the future of ERISA litigation." (Reish Luftman McDaniel & Reicher)

Executive Summary: Assumptions Used To Project Social Security's Financial Condition (PDF)
Excerpt: "The Academy also makes the following recommendations: All analyses of Social Security reform proposals that include financial projections should also include an explanation of the assumptions used; All analyses of proposals should rely on assumptions that are internally consistent; Where substantial uncertainty exists as to the appropriate level of a critical assumption, sensitivity analysis or a range of assumptions should be used ..." (American Academy of Actuaries)

Assumptions Used to Project Social Security's Financial Condition (PDF)
7 pages. Excerpt: "Experts outside the Social Security Administration ... have performed independent analyses of various reform proposals, sometimes including their own. These experts also use assumptions in their projections of Social Security's financial future, and those assumptions may differ from those used by the trustees. This issue brief describes the major assumptions used in projections of Social Security's financial condition and how variations in the assumptions affect the results." (American Academy of Actuaries)

Executive Summary: An Actuarial Perspective On the Social Security Trustees Report (PDF)
Excerpt: "The Trustees Report relies on demographic and economic assumptions to present intermediate, lowcost, and high-cost projections. A 1999 technical panel to review the trustees' actuarial assumptions concluded that the trustees' projection methodology is 'reasonable as a whole.' ... Other entities have used [different] assumptions ... For example, for its ten-year budget estimates, the Congressional Budget Office (CBO) uses more optimistic assumptions ..." (American Academy of Actuaries)

An Actuarial Perspective on the Social Security Trustees Report (PDF)
6 pages; May 2001. Excerpt: "This issue brief provides an actuarial perspective on the most recent report, together with sufficient background material for readers to obtain a good understanding of (1) what the trustees are saying about the future financial condition of Social Security and (2) the limitations of the trustees' assessment." (American Academy of Actuaries)

Another Question is Answered in the Stop, Look & Listen: Railroad Retirement Q&A Column
About 20 years ago, I divorced a railroad worker following 23 years of marriage. He's now retired and I receive a Tier 1 benefit as a divorced spouse. I'm now trying to get a portion of his Tier 2 benefit. Our divorce decree awards me his retirement benefit, but it does not specify an exact amount or percentage. And it was never filed with the Railroad Retirement Board (RRB). Can I file the divorce decree now and start receiving a portion of my ex-husband's Tier 2 benefit? (BenefitsLink.com)

DOL Obtains Consent Judgment Requiring Pension Plan Officials To Divest Plan of Investments
The Department of Labor has obtained a consent judgment that requires officials of the pension plan maintained by Morsches Lumber of Columbia City, Ind., to divest the plan of certain stock holdings and loans prohibited by ERISA. The consent judgment was entered by the U.S. District Court for the Northern District of Indiana, in Chao v. Paul J. Morsches Jr., et al. (SpencerNet)

Cleveland Indians Strike Out Before the Supreme Court on FICA Issues
Excerpt: "Reversing the 6th Circuit, the Supreme Court held that the back pay award in that case was subject to employment taxes in the year the award was paid, not the year the disputed wages should have been paid." (Practitioners Publishing Company)

Missouri Plans Pension System Change to Stem Brain Drain
Excerpt: "Two years ago, the Legislature revamped pension systems for state workers to encourage longtime employees to take early retirement. The changes increased pensions for retirees younger than 62. The stated aims: Provide room for promotions, reduce payroll costs and 'refresh the work force.' Problem is, the incentives worked. And now, some state agencies are worried about the brain drain. So the Legislature is poised to enact some counter-early retirement incentives." (St. Louis Post-Dispatch)

Increased Pension Benefits in Pennsylvania Draw Ire From Retirees
Excerpt: "Legislators who just approved major increases in retirement benefits for themselves and tens of thousands of other state workers and teachers are being flooded with complaints from retirees who say they were unfairly left out. Legislative offices and union headquarters were flooded with irate calls Wednesday from some of the state's 220,000 public school and state worker retirees." (The [Philadelphia] Inquirer)

Regretting Your Roth IRA Conversion?
Excerpt: "On paper, anyone under, say, 40 years of age would be foolish not to convert, because the 30 years of additional tax-free savings dwarfs the current tax bill. But the calculations assume that stock prices are always rising." (Forbes via Yahoo! Finance)

Senate Democrats Want More Time on Tax Bill
Excerpt: "Senate Democrats on Thursday sought to slow down Republican efforts to push a $1.35 trillion tax cut quickly through Congress, saying they needed more time to weigh the details of such a sweeping package.... Committee members said the bill would also likely include measures allowing bigger contributions to tax-favored Individual Retirement Accounts (IRAs) and employer-sponsored 401(k) retirement accounts." (Associated Press, via Excite News)

Retirement Planning, Part 2: Planning for Late Retirement
Excerpt: "[M]odern retirement has two distinct parts--- active retirement and declining retirement. Active retirement is what all the magazine articles are about. It is sunny, cheerful, and playful.... The second part of retirement remains in shadow. It is learned on a 'need to know' basis, buried beneath mountains of denial by all concerned. In late retirement--- the part where health is failing--- there are two basic choices...." (Scott Burns)

Can Phased Retirement Really Work? (PDF)
Excerpt: "The convergence of the emerging trends [in demographics, the labor market, and the economy] is driving both employers and employees to design formal programs that make 'phased retirement' an established feature of the work engagement, rather than through random, ad hoc arrangements. This article examines the current landscape of retirement plan arrangements in light of increasing demands for flexibility on the system." (Milliman & Robertson, Inc.)

Fewer Americans Saving for Retirement
Excerpt: "Fewer U.S. workers are saving for retirement as the economy has sagged and confidence is eroding that they will have enough money to live comfortably, according to a survey released Thursday. In the report by the Employee Benefit Research Institute and the American Savings Education Council, 71 percent of those polled said they have saved for retirement, down from 75 percent last year." (Associated Press)

(Following items also appear in Welfare Plans Edition)

Rabbi Trusts Holding Parent Stock Must Be Amended By May 16, 2001 To Avoid Adverse Tax Treatment
Excerpt: "Where a subsidiary is the grantor of a rabbi trust created for the benefit of the subsidiary's employees and the trust holds stock of the subsidiary's parent, distribution of the parent stock to the subsidiary's employees may result in the recognition of gain ... Gain recognition can be avoided, however, if the rabbi trust is amended ... This amendment will not be treated as a constructive dividend to the parent if it is adopted on or before May 16, 2001." (Pillsbury Winthrop LLP)

Demutualization: How to Handle an Employee Benefit Windfall
Excerpt: "When the arcane word 'demutualization' pops up in the news, CFOs should pinch themselves to stay awake--and read on. The reason? If an employee benefits provider demutualizes, or transforms itself from a mutual to a stock company, its policyholders could get million-dollar windfalls in cash or stock in the resulting IPO. That, in turn, could trigger the need to make thorny risk management choices promptly." (CFO.com)

Taking Stock of Option Repricing
Excerpt: "[Stock option] repricing is not such a simple process. Companies consider accounting standards, SEC regulations, and tax consequences, which can be uncontrollable when repricing occurs on the same day or within a short-term time frame." (InfoWorld.com)

Newly Posted or Renewed Job Openings (Post Yours!)

ERISA-Benefits Attorney

for ARIS Corporation
in PA

401(k) Sr. Administrator

for Fast-Growing Benefits Firm
in CA

Health and Welfare Implementation

for Buck Consultants, Inc., A Mellon Consulting Company
in NJ

Newly Posted Conferences (Post Yours!)